NKE Stock Trading Journal with VantagePoint

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs. Nike, NKE stock, is in focus today…

This journal entry looks at the recent market movements of Nike NYSE: NKE

VantagePoint Trading Journal NKE Stock: Update

Earlier in the week we highlighted a possible bearish opportunity in Nike, Inc. (NKE).  We demonstrated how purchasing the April 64.5/66 put spread for 0.35 could be a way to take advantage of this bearish momentum.  Here is the chart today:

The chart is continuing to show bearish strength.  But, this is a short term holding and NKE put in new highs above today’s predicted high.  We entered the spread for $0.35 and today we exited the spread at $0.24.  This is an example of conservative risk management for a signal that was not working out for us.  This allowed us to free up capital and focus to find and act on other opportunities.  That is crucial for short term options trading.

VantagePoint Trading Journal NKE Stock

The President of China, Xi Jinping, took the stage overnight at the Boao Forum for Asia, an annual summit that’s been dubbed the “Asian Davos.” He discussed plans to further open up the Chinese economy. He promised to “significantly lower” import tariffs on products including cars, as well as improve the investment environment for foreign companies, in a speech seen as conciliatory amid rising trade tensions between the U.S. and China.

To see through the political fog, it’s important to have a tool that can help you navigate the pre-existing relationships in the market. VantagePoint generates forecasts of market movement 1-3 days in advance with up to 86% accuracy. We can use the artificial intelligence forecasting software to analyze markets at all levels. Whether you are looking for individual stocks or futures, stock sector rotations, or broad indexes like the S&P, Dow, and the Russell, VantagePoint can easily compile that data.

The broad markets were trading up about 1.25% across the board in mid-day trading. Despite this broader bullish action, Nike, Inc. (NKE) was unchanged and remained to the downside. We are one tweet or comment away from all of these gains being swept away and if that were to happen, NKE is most likely going to go down at least as fast if now further given the bearish indicator we see in VantagePoint. Here’s the chart:

image of NKE stock trading diary with VantagePoint
VantagePoint recently indicated a potential downside breakout in NKE due to a bearish crossover between 4/6/18 and 4/9/18.

Chart Interpretation

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out four significant things.

1) We have a bearish crossover indicated by the blue predictive indicator line crossing below the black simple moving average between 4/6/18 and 4/9/18.
2) We can combine that with the VantagePoint propriety neural index indicator moving from the GREEN to the RED position one day earlier on 4/5/18.  This indicator measures strength and weakness for a 48-hour period. The move to the RED position indicates weakness and further makes the case for a potentially bearish scenario.
3) The predicted high and low for today’s range is below the actual high and low from yesterday’s session.
4) NKE stock failed to follow through when it made new highs on 4/5/18.

Because of these happenings, I want to play the VantagePoint bearish indication.

Strategy Discussion

If one were a straight stock trader, selling NKE stock in the $67.75 area could prove to be prudent. You are anticipating a move to the downside. It’s also a conservative way to enter NKE without the limitation of time. It would also be good practice to place a buy-stop order in the $69.00 area to mitigate potential losses.

For more active traders with a shorter investment time horizon, consider an options setup. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

The purchase of a debit put spread may be one way to approach this situation. The first order of business is to determine your target strike. This will serve as the short leg of our debit put spread. We need three pieces of information to perform this calculation: the current price, date of expiration and ATM implied volatility. NKE stock yields a target strike of $64.  You can consider the NKE April 20th 64/66.5 put spread paying $0.30. The maximum risk of this spread is the amount of premium you paid and the maximum reward is the width of this spread less premium paid.  Max risk = $0.30, max reward = $1.20 which gives us a reward to risk ratio of 4:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

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